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Released January 23, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Schlumberger Limited (NYSE:SLB) (Houston, Texas) expects a slow but steady recovery in oil markets throughout the world in 2017, led by North America and followed gradually by international markets. The company on Friday reported a fourth-quarter 2016 net loss of $204 million, compared to a net loss of $1.02 billion in fourth-quarter 2015. Industrial Info is tracking $5.35 billion of projects involving Schlumberger.
In a conference call regarding the earnings, Schlumberger Chief Executive Officer Paal Kibsgaard seemed guardedly optimistic about what the future held for the company and was more enthusiastic about North American onshore endeavors than other business segments. "In North America, overall revenue increased 4% sequentially, driven by an improving land business in the U.S. and western Canada, as drilling and completions activity increased, and service pricing started to recover," he said.
Kibsgaard's comments about offshore drilling were less than optimistic. "Offshore revenue declined again sequentially as the rig count dropped further and pricing remained under pressure. In spite of the significant technical operational challenges in this market, the resulting business environment is potentially becoming unsustainable for us, and will either lead to a recovery in servicing pricing or a narrowing of our service offering with redeployment of resources toward markets that offer more adequate returns."
Kibsgaard went on to discuss how North America would lead the recovery in oil prices and drilling. "E&P [exploration and production] spending surveys currently indicate that 2017 North America E&P investments will increase by around 30%, led by the Permian Basin, which should lead to both higher activity and a long overdue recovery in service industry pricing. In the international markets, the recovery will start slower, driven by the constraints of the international E&P industry, where various operator groups determine their investment levels based on full-cycle returns and their available free cash flow. At current oil price levels, this will result in the third successive year of lower capex spend, which will further weaken the state of the international production base."
However, every cloud has a silver lining. Kibsgaard said that internationally, with little E&P activity to replace existing wells, producing reserves are being depleted with no replacement. "This is equivalent to borrowing barrels from the future," said Kibsgaard. "As a result, the activity and capex required going forward to replenish reserves in order to uphold production for the medium- to long-term will be much higher than current decline rates may suggest." Kibsgaard went on to say that recovery trends could only be positive in the future.
Among the Schlumberger projects being tracked by Industrial Info is the $1.19 billion development of the Maria Satellite field off the coast of Norway. The project involves installing two 4-slot combined production and water injection templates with two production wells and a water injection well to produce both crude oil and natural gas. The project, which kicked off in summer 2016, is expected to produce about 130 million barrels of crude oil and 2 billion standard cubic meters of gas when completed. The project is expected to be wrapped up in the first quarter of 2018. Schlumberger is acting as a contractor on the project, which is owned Wintershall Norge AS (Stavanger, Norway), Petoro (Stavanger) and Centrica Resources AS (Windsor, England).
Also under development is a $250 million grassroot underground storage cavern near Lodi, Italy. The project involves establishing 14 underground caverns at a depth of 1.4 kilometers to contain approximately 1.3 billion standard cubic meters of natural gas. The project kicked off in summer 2016 and is expected to be completed by fourth-quarter 2018. Schlumberger is acting as engineering, procurement and construction firm on the project, which is owned by Ital Gas Storage (Milan, Italy).
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
In a conference call regarding the earnings, Schlumberger Chief Executive Officer Paal Kibsgaard seemed guardedly optimistic about what the future held for the company and was more enthusiastic about North American onshore endeavors than other business segments. "In North America, overall revenue increased 4% sequentially, driven by an improving land business in the U.S. and western Canada, as drilling and completions activity increased, and service pricing started to recover," he said.
Kibsgaard's comments about offshore drilling were less than optimistic. "Offshore revenue declined again sequentially as the rig count dropped further and pricing remained under pressure. In spite of the significant technical operational challenges in this market, the resulting business environment is potentially becoming unsustainable for us, and will either lead to a recovery in servicing pricing or a narrowing of our service offering with redeployment of resources toward markets that offer more adequate returns."
Kibsgaard went on to discuss how North America would lead the recovery in oil prices and drilling. "E&P [exploration and production] spending surveys currently indicate that 2017 North America E&P investments will increase by around 30%, led by the Permian Basin, which should lead to both higher activity and a long overdue recovery in service industry pricing. In the international markets, the recovery will start slower, driven by the constraints of the international E&P industry, where various operator groups determine their investment levels based on full-cycle returns and their available free cash flow. At current oil price levels, this will result in the third successive year of lower capex spend, which will further weaken the state of the international production base."
However, every cloud has a silver lining. Kibsgaard said that internationally, with little E&P activity to replace existing wells, producing reserves are being depleted with no replacement. "This is equivalent to borrowing barrels from the future," said Kibsgaard. "As a result, the activity and capex required going forward to replenish reserves in order to uphold production for the medium- to long-term will be much higher than current decline rates may suggest." Kibsgaard went on to say that recovery trends could only be positive in the future.
Among the Schlumberger projects being tracked by Industrial Info is the $1.19 billion development of the Maria Satellite field off the coast of Norway. The project involves installing two 4-slot combined production and water injection templates with two production wells and a water injection well to produce both crude oil and natural gas. The project, which kicked off in summer 2016, is expected to produce about 130 million barrels of crude oil and 2 billion standard cubic meters of gas when completed. The project is expected to be wrapped up in the first quarter of 2018. Schlumberger is acting as a contractor on the project, which is owned Wintershall Norge AS (Stavanger, Norway), Petoro (Stavanger) and Centrica Resources AS (Windsor, England).
Also under development is a $250 million grassroot underground storage cavern near Lodi, Italy. The project involves establishing 14 underground caverns at a depth of 1.4 kilometers to contain approximately 1.3 billion standard cubic meters of natural gas. The project kicked off in summer 2016 and is expected to be completed by fourth-quarter 2018. Schlumberger is acting as engineering, procurement and construction firm on the project, which is owned by Ital Gas Storage (Milan, Italy).
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
